The otherworldly realm of decentralized finance (DeFi) is moving at a breakneck pace, creating new opportunities and dangers every day. ThrowingToken.com is here to navigate this complex landscape, offering expert insights on everything from DeFi insurance to NFT market analysis. The strategic partnership between MoonPay and Axal has recently turned heads. Axal provides users the opportunity to earn amazing yields of 6-10% on stablecoins via Axal Yield. This article will demystify MoonPay and Axal's offering, explaining how it works, the risks involved, and whether it's a viable alternative to traditional savings.

Understanding MoonPay and Axal

MoonPay is a fintech company that makes it easy for anyone to buy, sell and trade cryptocurrencies and other digital assets. It acts as a bridge between traditional finance and the crypto world, allowing users to use everyday payment methods to access digital assets. With nearly 30 million customers and powering the infrastructure for approximately 500 companies across the decentralized economy, MoonPay has established itself as a significant player in the crypto space.

Axal is a young enterprise technology company located in New York City. It focuses on developing software that provides easy access to DeFi yield strategies. It has joined forces with leading DeFi protocols like Morpho, Euler and Base. This integration opens up yields and connects users to exciting opportunities throughout the DeFi ecosystem. Axal’s mission and area of expertise is making DeFi yields efficient and secure routes.

The partnership between MoonPay and Axal combines MoonPay's extensive user base and payment infrastructure with Axal's DeFi expertise. Together, they launched Axal Yield, a savings tool that enables users around the world to earn on-chain yield seamlessly. Through this collaboration, we hope to continue bringing DeFi to a more diverse and wider audience.

Axal Yield: How It Works

Axal Yield uses MoonPay’s Virtual Accounts feature and Axal’s algorithmic smart automation engine to provide users with a 6-10% APY created using diversified DeFi strategies. Importance of the yield generation process Few processes have features uniquely designed to maximize yield generation and limit risk.

Key Features of Axal Yield

  • Non-custodial Model: Users retain control of their funds through a non-custodial model secured by TEE-enforced signing policies and batched execution. This means that Axal and MoonPay do not directly hold users' assets, reducing the risk of custodial theft or mismanagement.
  • Real-time Reconciliation and Allocation: The platform provides real-time reconciliation and allocation of funds, ensuring transparency and efficient deployment of capital.
  • Fully Automated Yield Routing: Axal Yield automates the process of routing funds to various DeFi protocols to optimize yield. This eliminates the need for users to manually manage their DeFi positions.
  • End-to-End Transparency and Control: Users have complete visibility into how their funds are being utilized and can maintain control over their investment strategies.

Axal Yield’s mission is to provide low-risk, diversified lending strategies, and has natively integrated with 10+ DeFi protocols to do just that. By distributing investments over the different protocols, the platform hopes to mitigate the loss from a failure of any one protocol.

Risks and Considerations

The lure of receiving 6-10% APY on your stablecoins is real, but you need to be aware of the risks that accompany this new type of investment. So, while DeFi yields can be extremely lucrative, they are entirely dependent on market conditions and the performance of the underlying protocols.

Potential Risks

  • Stablecoin De-pegging: Stablecoins, despite their name, are not always stable. Events like the de-pegging of Tether and the collapse of TerraUSD have demonstrated that stablecoins can lose their peg to the underlying asset, resulting in significant losses for investors.
  • Protocol Vulnerabilities: DeFi protocols are susceptible to hacks and exploits. Past incidents, such as the OUSD de-peg in 2020 and the 2022 Terra/UST collapse, highlight the importance of carefully selecting protocols with robust security measures.
  • Regulatory Uncertainty: The regulatory landscape for DeFi is still evolving, and new regulations could impact the viability of certain DeFi strategies.
  • Loss of Confidence: A loss of confidence in stablecoins could trigger large-scale redemption requests, leading to the liquidation of reserve assets with negative contagion effects on the financial system.
  • Limited Redemption Possibilities: If there are limited redemption possibilities, it could exacerbate the risk of a loss of confidence, making it difficult for investors to redeem their stablecoins.
  • Lack of Transparency: The transparency of reserve asset composition is still scarce, making it difficult for investors to assess the risks associated with stablecoins.
  • Dependence on crypto-asset markets: Stablecoins are closely intertwined with unbacked crypto-assets, which can pose risks to financial stability if current trends continue.

Is Axal Yield a Viable Alternative to Traditional Savings?

Axal Yield gives users a chance to earn a higher yield than with typical savings accounts, but it is accompanied with much higher risk. Unlike traditional savings accounts—which are usually insured by government agencies, creating a guarantee for depositors—crypto does not come with this same safety net. DeFi yields are not insured, and they come with a risk of market volatility and protocol risks.

If you’re someone with a higher risk tolerance and knowledge of DeFi, Axal Yield could be an excellent option for you. It provides an attractive option for yielding on stablecoins. At the same time, it’s important to do in-depth research, diversify holdings, and invest only what you can afford to lose.

It's worth noting that whales and institutions often employ loop lending or institutional wealth management strategies to earn even higher APYs (10%+) in DeFi. These strategies are often more complicated and riskier. Consequently, they are most appropriate for people who have a lot of capital to deploy and a clear understanding of the market.

Whether or not Axal Yield is the right technology for you depends on your individual risk appetite. It largely depends on your financial objectives and knowledge of the DeFi ecosystem. ThrowingToken.com aims to help readers learn more and better understand what’s needed to safely and successfully traverse the DeFi universe.